Category: Vendors & Contractors

In many organizations, 60% to 70% of the projects finish late, over budget and/or fail to deliver much value. Not using a Statement of Work – SOW during the project initiation is a major cause of project failure. Project Phases Main Page

The project sponsor or customer issues the Statement of Work. It is their first communication to the project manager about what the project should deliver. It also describes what resources the project can consume to deliver it. The Statement of Work – SOW defines the deliverables. The sponsor should define the scope with the acceptance criteria that measures the project’s success. A Statement of Work can include the following (as well as other items):

Business Purpose: This includes a link to the company strategy

Scope of work: A short narrative definition and the quantified acceptance criteria

Location of Work: Describes where the project manager and team will do the work

Period of Performance: Specifies the start and finish time frame

Deliverables Schedule: Lists and describes what is due and when

Budget – The largest amount the project manager can spend to produce the required deliverables

Type of Contract/Payment Schedule: The project acceptance will depend on whether the budget available will be enough to cover the work required.

A New Project Without a Statement of Work – SOW

People get excited about implementing a new idea or about solving a new problem. All of the discussion is about the project finish date and all the things they must do. Particular attention is paid to the tasks they must do first. Everyone wants to talk about what to do first because they can immediately start work on them. They don’t take the time to decide what business outcome the project must deliver. They also don’t define the specific acceptance criteria they’ll use for the project’s deliverables. In other words, they don’t prepare a Statement of Work – SOW.

In many organizations, there is no thorough decision-making process. No one makes any decisions or commitments before people start work on the first few tasks. The project has little chance for success if the project starts without the sponsor specifying exactly what he/she wants. They must also specify what is “good enough.” “Good enough” defines how the sponsor will measure the project’s success. Here is an example. A goal of 100% accuracy on billing statements is a difficult and expensive achievement. But the goal of 90% accuracy is “good enough” because it is a 15% improvement over the current accuracy rate. Without the specifics of what the sponsor wants and how he/she will measure success, senior management can’t decide if they should approve the project’s initiation. Additionally, no one is committed to the project’s success. That’s because they don’t know exactly what the project must deliver to be considered a success.

Statement of Work – SOW Solution

The organization can fix this problem by requiring that the project sponsor complete a Statement of Work – SOW for every project before work can begin. The Statement of Work is the sponsor’s (not the project manager’s) commitment to the organization about what he/she will deliver for the resources they will spend. The Statement of Work supports senior management’s control over the initiation of projects. It ensures there are resources available to work on the organization’s major strategic initiatives. When project sponsors use the Statement of Work – SOW properly, they set measurable goals and decide what to include and, as importantly, what to exclude from the project.

To learn more about how to work with the project sponsor or customer to create the Statement of Work – SOW, consider our online project management courses. You work privately with an expert project manager who is your coach and instructor. You may begin a course when you wish and work on it at your pace and as your schedule allows. You and your instructor have as many phone calls and live video conferences as you wish. Take a look at the courses in your specialty.

Project Contractors and Consultants

Often times on projects, the project manager must work with project contractors and consultants. These are outside professionals, consultants and other vendors required to finalize some of the project tasks. This enables the project manager to secure high-level professional resources. The key to success with contractors and consultants is setting up control mechanisms to ensure the work is finished on time and within budget.

Handled poorly, contractors and consultants can cause substantial budget overruns on your project and late finishes because their work is not completed on time. The worst of all circumstances is when the project manager does not establish the framework in which the contractor or consultant has to operate. It is worth the money to offer these outside professionals a small incentive for finishing on time and budget. You should also have your written agreement reflect a penalty if they are late or spend more than planned. Those steps give the contractor and consultant some “skin in the game.” That is, they have the same incentives you do, rather than simply focusing on maximizing their profits.

Project Contractors and Consultants: Steps

First, you should write a procurement Statement of Work (SOW) that contains the required scope of work, deliverables, duration, standards, conditions, and payment terms that the contractors and consultants will work under. For larger expenditures, you should find qualified contractors who can accomplish the tasks by sending them a Request for Quotation (RFQ) based on the SOW.

The SOW should include your payment terms. It is best to pay them based on measurable achievements, not by the hour or day. Depending on the type of work, you might use measures such as how many square meters are done or how many pounds are produced, etc. Always try to find a way to objectively measure the achievement. Paying by the hour is not the proper way to control project costs and will not help complete the project on time. For example, paying an IT contractor by the hour is a bad idea because he might spend days on a small issue to increase his fee. Payment should be based on measurable achievements like how many services are tested and running smoothly. These term should also include the incentives for on time and on budget completion and and penalties for failure.

Tracking the work of project contractors and consultants is very important to ensure the deliverables are submitted within scope, duration, and cost. Payments based on achievements controls the budget. You need to ensure the duration after controlling the cost. Penalties can be applied as a way to control the duration and motivate the contractor to finalize the work during the agreed upon time frame. Alternatively, you can establish incentives in the SOW like, “If the contractor achieves 40 square meters daily and completes the entire task in three days, the price will be $20 per human resource hour. The price will be $15 per human resource hour if the contractor completes the entire task in five days.” This will challenge the contractor and lead the project to success.

Project bidders conferences are part of the process of selecting vendors/sellers who provide goods or services to the project. That process begins during planning when the project manager and team formulate the request for proposal (RFP). At the same time, they create the vendor/seller selection and evaluation criteria they’ll use to rank the proposals. During procurement planning, the project manager should also secure or draft the contract he/she will use with the winning vendor/seller. These documents become part of the approved project management plan. The vendor/seller evaluation process is protected from political influence because any changes to those documents have to go through change control.

The request for proposal (RFP) that is sent to potential vendors/sellers contains information about a meeting, a bidders conference, held prior to the submission of the bid or proposal. All prospective bidders are invited to this public meeting. Here the project manager and other stakeholders from the organization describe what they want and how they will select a vendor/seller to provide it. Prospective bidders can ask questions and receive answers from the project manager and procurement officials. Meeting minutes are taken and distributed to all prospective vendors/sellers, including those who did not attend the bidders conference. The intent of the bidders conference is to ensure that all prospective vendors/sellers have the same information to use in preparing their proposals.

Project Bidders Conference – Procurement Process

In terms used by the Project Management Institute (PMI), the bidders conference is a tool and technique of the “Conduct Procurements” process. Project managers make the decision to have a bidders conference and develop the procurement documents during the “Plan Procurement Management” process. T
he purpose of the bidders conference is to solicit proposals where the vendors/sellers will develop much of the statement of work (SOW) detail and their approach. It is often advantageous to give potential vendors/sellers the opportunity to ask questions in a forum where all of them can hear the answers.

Project Bidders Conference – Format and Information

The bidders conference is described in the RFP but the exact date and time are often announced later. While there are no set standards for the bidder conference, many organizations have a consistent format they use. This format may include presenting information such as the overview of the organization, the project, bidder qualifications, minimum requirements, deliverables, time frame and the SOW for the project. They also use these conferences to encourage vendors/sellers to offer creative and novel approaches in the proposals they make.

Prospective vendors/sellers often attend the bidder conference in order to fill in these details by asking questions regarding the product of the project. These questions often focus on issues such as the legal and financial requirements, the technical specifications of the product and the time frame for the project. They also attend bidder conferences to assess the competition and their odds of success.

Project Bidders Conference – Rules

In order to ensure a professional environment at the bidders conference, a few rules are implemented before the conference begins. Depending on your organization and its legal and regulatory environment, the rules of your bidders conference may be well documented and exacting, or they may be casual and informal.
Most importantly, the selection process should be fair and meet ethical standards so that no one can accuse your organization of favoring a particular vendor/seller or divulging more information to one than the others. So it is critical to avoid any private conversations between the potential vendors/sellers and the project manager and/or project stakeholders. It is necessary to give every potential vendor/seller the opportunity to ask questions and have them answered at the conference. All questions and answers must happen in front of all of the potential vendors/sellers. The questions and answers are recorded and distribute to everyone who received the RFP, whether or not they came to the bidders conference. If a vendor/seller asks a question after the bidders conference, the question and its answer must be documented and as an update to all potential vendors/sellers.

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